Weak tea and biscuits group sale

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The Independent Online
THE American venture capital group that acquired Hillsdown Holdings in this year's biggest private equity deal is thought to be considering a disposal of the ailing food producer.

Hicks, Muse, Tate & Furst is said to have been alarmed by the performance of the company since it was acquired in June for pounds 537m. Venture capital sources said that Hillsdown, which is best known for Typhoo tea, Chivers jam and Buxted chickens, is operating at least 15 per cent below Hicks, Muse's budget forecasts. Hillsdown's poultry division has been hit by the continued strength of sterling, which has played in to the hands of competitors from the low countries. Hillsdown's ailing biscuit business is also thought to be performing worse than expected.

One analyst said: "I would imagine that the scale of the problems in poultry came as quite a surprise. The division has been cauterised." He added that a sale of the poultry division was likely to come first.

A spokeswoman for Hicks, Muse denied that the deal had turned sour. However, quoted companies in the same markets as Hillsdown, have seen their shares marked down heavily since June. And there is concern that the arrival in the UK of Wal-Mart, the giant US supermarket chain that owns Asda, could put an additional squeeze on food manufacturers.

Shares in United Biscuits - best known for Hula Hoop crisps and Hob Nob biscuits - have slumped this year. The company is now on the verge of being taken over, with a financial consortium involving Paribas, Deutsche Bank and Cinven, the favourite. Other possible bidders are Keebler Foods of the US and Nabisco Holdings. Unigate, the food and logistics group, has also been the subject of bid speculation since last month's revelation of a 38 per cent slump in interim profits.

Hicks, Muse captured Hillsdown after beating off competition from Candover, the fellow venture capitalist which was backing the company's management. Michael Teacher, chief executive of Hillsdown, left after the takeover with a pounds 400,000 payoff. At the time of the acquisition, John Muse, chief operating officer of Hicks, Muse, rejected criticism that he had paid too much in the deal. He said that Hicks, Muse had bought on the basis of future performance, not because of what had gone before.

Hillsdown was founded by the Thompson family, who sold out of the company just before the 1987 stock market crash. Hicks, Muse is among the most aggressive of the American private equity houses that have begun targeting European assets. Among its other big deals this year was the purchase of the Mumm and Perrier Jouet champagne labels from Seagram, the Canadian drinks firm.